The Bermuda Monetary Authority has published a consultation paper for regulations surrounding virtual currency businesses and ICOs. The draft gives proposals on creating a framework for businesses that will help regulate cryptocurrencies as well as encourage development in the industry.
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“The emergence of new financial products and services created through the use of technology has opened new and exciting opportunities for entrepreneurs and businesses. – the government recognizes that there’s significant interest in virtual currencies and blockchain technology.” -Wayne Caines, Minister of National Security
The consultation paper was published as well as sent to over 150 key business partners of Bermuda and was described by Wayne Caines, the Minister of National Security, as a “landmark legislation of Bermuda”. Caines also stated Bermuda is looking to become a global leader in the fintech space.
The consultation paper suggests that all businesses that participate in the sale or services of cryptocurrencies and ICOs collect and store customer’s information. This seems to be one of the number one concerns for countries who are looking to add regulations to the crypto industry, as the risks of money laundering, tax evasion, price manipulation, insider trading, hackings, and terrorist funding is higher with virtual currencies.
The document also seeks to tighten up regulations in the ICO sector and treat ICOs as a restricted business activity that will require consent from the minister of finance. The new Companies and Limited Liability Company Act outlines the strict framework ICOs must follow in order to be compliant.
Under the new Act, ICO companies must report to the minister of finance, the underlying digital asset offered for sale, information on the development and implementation of any product, service and projects, timelines of completion, the target amount looking to be raised, as well as rights, features, functionality, and intended transfer-ability of the digital asset that is offered for sale. Companies that fail to comply will have enforcement action taken which may include penalties upto $10,000,000, public censure (name and shame), prohibition orders (banning from operating in Bermuda), and injunctions (court ordered cease and desists).
The Bermuda Monetary Authority does not recognize cryptocurrencies as legal tender, but more a digital representation of value that can digitally traded and used as a medium of exchange and store of value. They do state virtual currencies are more transparent than cash due to the transactions being recorded on a public distributed ledger, or blockchain.
Considering the fact that most of the virtual currency industry still remains unregulated in most countries, Bermuda is looking to be one of the trailblazers by implementing a dedicated comprehensive virtual currency regulatory framework. While we are seeing more and more offshore countries like Malta and Antigua and Barbuda welcoming the crypto industry with lax regulations, the consultation paper gives a good general idea of concerns and legal frameworks on how to tackle the booming crypto scene.